KQ fails to pay dividend for first time in 14 years

Kenya Airways shareholders will not receive a dividend for the first time in 14 years after the carrier reported the biggest loss in the history of companies listed at the Nairobi Securities Exchange (NSE).

The national carrier, which is owned 29.8 per cent by the government, posted a loss of Sh7.86 billion in the year to March compared to a profit of Sh1.66 billion last year , which was still a 57 per cent drop from the 2011 numbers.

The airline, which listed at the NSE in 1996, previously only failed to pay to pay a dividend in 1999. Despite a dip into losses in 2009, it was able to pay a dividend.

This is a blow to investors who saw their share hit its lowest level in a year at Sh10.10 and which has shed 25 per cent over the past year, making it the worst performing counter at the NSE over the period that saw firms record double-digit share appreciation.

Management blamed the eurozone debt crisis, fears of unrest during Kenya’s March elections and a string of gun and grenade attacks following Kenya’s foray into Somalia in pursuit of Al-Shabaab militants.

KQ’s revenues dropped by Sh9 billion to Sh98.8 billion on a drop in passenger traffic. KQ says passenger traffic dropped 3.6 per cent to 9.5 million.

Costs changed little at Sh107 billion. The direct costs, including fuel and labour expenses, stood at Sh77.2 billion the same level as last year when they rose 44 per cent, a pointer that the national carrier is getting on top of its costs, which have previously influenced profits.

With annual sales at Sh98.8 billion, Kenya Airways has been overtaken by Safaricom, whose revenues increased to Sh124.2 billion in the year to March from Sh106.9 billion. The airline is now the third largest firm on sales with KenolKobil at the lead.

This is the first time KQ will not pay dividends since Titus Naikuni took the helm in 2003. It paid a dividend of Sh1.50 in 2011 and Sh0.25 last year.

Air France KLM, which owns 26.73 per cent of the airline, will miss out in the dividend boom that multinational firms like Vodafone, Barclays Plc, Diageo and BAT enjoyed this year following improved profitability in corporate Kenya.

Vodafone earned Sh7.2 billion dividend and fees payout from Safaricom, Barclays Plc pocketed Sh3.72 billion from its local shop and Diageo received Sh3.46 billion from East Africa Breweries Limited.

Peaceful elections, lower oil prices and the easing of tensions in neighbouring Somalia should help Kenya Airways recover from a tough two years, the airline said (see article).

“Somalia is finally settling down and we had a peaceful election; so on the combination of those two things, we expect the travel advisories that we suffered last year will not be evident this year,” said finance director Alex Mbugua.

Mr Mbugua also cited the lower price of fuel at $95 per barrel since April and a pick-up in passenger and cargo volumes in the first months of this financial year.

“April and May have been good as compared with last year and we expect that trend to continue,” he said.

But the airline is not putting brakes to cost management. The possibility of opening a hotel in Nairobi to cut costs associated with putting up staff and passengers whose flights have been delayed is on KQ’s radar.

The modernisation of its fleet with more fuel-efficient Embraers and Boeing B-787 Dreamliner planes will also lower costs. It also plans to set up a fuel procurement company in order to increase efficiency in the buying of the commodity, which accounts for 38.5 per cent of total operating costs.

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